Gloria v. Builders Savings
REITERATIONFacts
The Antecedents: Spouses Juan and Conchita Gloria were the registered owners of a parcel of land. Following Juan's death, Conchita and their daughter, Maria Lourdes Gloria-Payduan, filed a complaint against Builders Savings and Loan Association, Inc. (Builders Savings), Benildo Biag, and Manuel F. Lorenzo. They alleged that Biag deceived them into surrendering the title, subsequently using it to mortgage the property to Builders Savings. Conchita claimed she was fraudulently induced to sign loan and mortgage documents, which also bore the forged signature of her deceased husband, Juan. The petitioners asserted that the mortgage and loan documents, along with the subsequent foreclosure and sale of the property to Builders Savings, were null and void due to fraud, forgery, and lack of proper notarization. Procedural History: The Regional Trial Court (RTC) initially dismissed the petitioners' complaint. However, upon reconsideration, the RTC issued an order on March 12, 2004, declaring the real estate mortgage and promissory note null and void, directing the cancellation of annotations on the title, and awarding damages and attorney's fees to the petitioners. Builders Savings appealed this decision to the Court of Appeals (CA). The CA reversed the RTC's order on March 13, 2012, dismissing the complaint based on procedural infirmities, specifically the alleged lack of real party in interest status for Maria Lourdes and defective verification and certification against forum shopping. The CA denied the petitioners' motion for reconsideration in a resolution dated June 18, 2012. The Petition: The petitioners filed a Petition for Review on Certiorari with the Supreme Court, assailing the CA's decision and resolution. They argue that Maria Lourdes, as a co-owner by inheritance, is a real party in interest and that the CA erred in requiring a prior judicial declaration of heirship. They also contend that the CA improperly raised and decided issues regarding defective verification and certification against forum shopping, which were not raised by the respondent. Furthermore, they maintain that the subject real estate mortgage and promissory note were null and void due to simulation and forgery, as Juan Gloria had passed away years before their supposed execution. The petitioners pray for the annulment of the CA's dispositions and the reinstatement of the RTC's order.
Issue(s)
Whether Petitioner Maria Lourdes Gloria-Payduan, as co-owner of the subject real property, is a real party in interest. Whether it is appropriate for the appellate court to pass upon an issue not raised by appellant in its appellant's brief's assignment of errors. Whether the real estate mortgage and promissory note are null and void.
Ruling
The Supreme Court granted the petition, annulled and set aside the decision and resolution of the Court of Appeals, and reinstated the order of the Regional Trial Court. The Court found that Lourdes is the daughter of Juan and Conchita and thus an heir to Juan, making her a co-owner of the subject property with Conchita. The Court held that a prior declaration of heirship is not necessary for an heir to assert their rights. The Court also found that the failure of co-owners to sign the verification and certification against forum shopping is not fatal, constituting substantial compliance. Finally, the Court found that the real estate mortgage and promissory note were simulated and void due to fraud and forgery, particularly the forged signature of Juan Gloria, who was already deceased at the time of execution.
Ratio Decidendi
On the issue of Maria Lourdes Gloria-Payduan as a real party in interest: The Court ruled in favor of the petitioners, holding that Lourdes is indeed a real party in interest. Evidence, including a birth certificate and her own testimony, established her as the daughter of Juan and Conchita. As the daughter of the deceased Juan, she is a compulsory heir and thus a co-owner of the subject property with Conchita. The Court reiterated the principle that successional rights transmit from the moment of death, and a prior judicial declaration of heirship is not a prerequisite for an heir to commence an action to protect their inherited rights. The Court cited Capablanca v. Bas and Quison v. Salud to support the proposition that heirs can assert their rights to property without prior settlement proceedings, as title passes immediately upon death, subject only to administration claims. On the issue of the appellate court passing upon issues not raised: The Court found merit in the petitioners' argument that the CA erred in considering the defective verification and certification against forum shopping, as these issues were not raised by the respondent in its appeal brief. However, the Court proceeded to rule on the merits of the case, finding that even if these procedural issues were considered, the substantive claim of nullity of the mortgage and promissory note was valid. The Court emphasized that procedural rules are meant to serve justice and should not be applied with absolute literalness to subvert the ultimate objective of resolving the case on its merits, especially when substantial compliance is evident. On the nullity of the real estate mortgage and promissory note: The Court found that the RTC was correct in declaring the mortgage and promissory note null and void. The evidence showed that the documents were simulated. Petitioners entrusted the title to Biag for reconstitution, not for mortgaging. Biag, without their knowledge or consent, used the title to secure a loan, falsifying the documents by forging Juan's signature and fraudulently obtaining Conchita's signature. The Court emphasized that a forged or fraudulent deed is a nullity and conveys no title. It is essential that the mortgagor be the absolute owner of the property, which Biag was not. The Court also highlighted the mortgagee's duty to exercise extra diligence, especially when the applicant is not the registered owner, to prevent fraud and forgery, citing Bank of Commerce v. Spouses San Pablo, Sr. and Land Bank of the Philippines v. Poblete.
Main Doctrine
A forged or fraudulent deed is a nullity and conveys no title. In a real estate mortgage contract, it is essential that the mortgagor be the absolute owner of the property to be mortgaged; otherwise, the mortgage is void. Furthermore, a mortgagee should exercise extra diligence when the person applying for the loan is other than the registered owner of the property being mortgaged.